Thursday 1 August 2019

Fed Spits In Trump’s Coffee


Baltic Dry Index. 1868 -31   Brent Crude 65.17

Never ending Brexit now October 31st, maybe.  91 days away.
Nuclear Trump China Tariffs Now In Effect.
USA v EU trade war postponed to November, maybe.

The true costs of very low interest rates

Artificial distortions can cause ‘clusters of errors’ by businesses
Caitlin Long  August 11, 2010

Markets tend to cheer falling interest rates. Low interest rates, however, can entail real economic costs that become evident over time.

As widely expected the US central bank cut it’s key interest rate yesterday, but only by a tiny quarter of one percent, ignoring President Trump’s call for a bigger interest rate cut.

Though they didn’t poke him in the eye with no rate cut at all, Chairman Powell did spit in Trump’s coffee saying “Let me be clear – it’s not the beginning of a long series of rate cuts,” although he did hedge it a bit by adding, “I didn’t say it’s just one rate cut.” So he only spat once, for now.

It wasn’t exactly the shot of Adrenalin the markets or President Trump were expecting. A long hot, wobbly August now lies ahead for many stocks.

Fed cuts interest rates, signals it may not need to do more

July 31, 2019 / 6:06 AM
WASHINGTON (Reuters) - The Federal Reserve cut interest rates on Wednesday, but the head of the U.S. central bank said the move might not be the start of a lengthy campaign to shore up the economy against risks including global weakness.

Fed Chairman Jerome Powell cited signs of a global slowdown, simmering U.S. trade tensions and a desire to boost too-low inflation in explaining the central bank’s decision to lower borrowing costs for the first time since 2008 and move up plans to stop winnowing its massive bond holdings.
“Let me be clear – it’s not the beginning of a long series of rate cuts,” Powell said in a news conference after the Fed released its latest policy statement. At the same time, he said, “I didn’t say it’s just one rate cut.” 

Financial markets had widely expected the Fed to reduce its key overnight lending rate by a quarter of a percentage point to a target range of 2.00% to 2.25%, but many traders expected clearer confirmation of forthcoming rate cuts.

U.S. President Donald Trump, who has repeatedly attacked the Fed’s policy stance under Powell and demanded that it push through big rate cuts, said on Twitter the Fed chief “let us down” by not telegraphing that an aggressive easing was coming.

U.S. stock prices fell during Powell's news conference. The benchmark S&P 500 index .SPX closed down 1.1% for the day. Yields on 2-year notes US2YT=RR, a proxy for Fed policy rates, rose to 1.87%.

Ken Polcari, managing principal at Butcher Joseph Asset Management, said Powell’s message was “not what the market was expecting to hear” even though most traders expected a rate cut. “He is not shutting the door, but he is also not saying there is another one coming in September, so hold on,” Polcari said.
More

Asian markets fall after Fed rate cut, end of U.S.-China trade talks

Published: July 31, 2019 11:59 p.m. ET
Asian markets fell in early trading Thursday, following the Fed’s first interest-rate cut in more than a decade.

Stocks slid on Wall Street after the Fed cut interest rates by 25 basis points and failed to clearly signal whether more cuts were on the horizon.

Meanwhile, trade negotiations between the U.S. and China concluded in Shanghai, with no major breakthrough. China did agree to buy more U.S. agricultural products, and the White House said talks are expected to continue in Washington in September. The ongoing trade war has hurt China economy, though a report Thursday found China’s factory activity improved slightly in June, though it was still in contraction.
More

Latest U.S.-China trade talks 'constructive', Beijing says

July 31, 2019 / 1:55 AM
SHANGHAI (Reuters) - U.S. and Chinese negotiators wrapped up a brief round of trade talks on Wednesday that Beijing described as “constructive”, including discussion of further purchases of American farm goods and an agreement to reconvene in September.

The first face-to-face trade talks since a ceasefire was agreed last month amounted to a working dinner on Tuesday at Shanghai’s historic Fairmont Peace Hotel and a half-day meeting on Wednesday, before U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin flew out. 

“Both sides, according to the consensus reached by the two leaders in Osaka, had a candid, highly effective, constructive and deep exchange on major trade and economic issues of mutual interest,” China’s Commerce Ministry said in a statement shortly after the U.S. team left Shanghai.

The statement said negotiators discussed more Chinese purchases of agricultural products from the United States, which had become a bone of contention after U.S. President Donald Trump said China had not delivered on promised purchases.

The talks began amid low expectations, with Trump on Tuesday accusing Beijing on Twitter of stalling, and warning of a worse outcome for China if it continued to do so.

On Wednesday, Chinese Foreign Ministry spokeswoman Hua Chunying said that she was not aware of the latest developments during the talks, but that it was clear it was the United States that continued to “flip flop”.

“I believe it doesn’t make any sense for the U.S. to exercise its campaign of maximum pressure at this time,” Hua told a news briefing in response to a question about the tweets.

“It’s pointless to tell others to take medication when you’re the one who is sick,” she said.

---- The Shanghai talks were expected to center on “goodwill” gestures, such as Chinese commitments to purchase U.S. agricultural commodities and steps by the United States to ease some sanctions on Chinese telecoms equipment giant Huawei Technologies Co Ltd, a person familiar with the discussions told Reuters earlier.

Those issues are somewhat removed from the more core U.S. complaints in the trade dispute, including Chinese state subsidies, forced technology transfers and intellectual property violations.

As talks were just beginning on Tuesday, Trump said on Twitter that China appeared to be backing off on a pledge to buy U.S. farm goods, and he warned that if China stalled negotiations in the hope that he wouldn’t win re-election in the November 2020 U.S. presidential contest, the outcome would be worse for China.
More

Despite Reuters spin in the headline, the latest very short USA v China trade talks were anything but constructive. Both sides called it a draw and went away for their summer holidays. This trade war isn’t turning out to be easy to win at all.

By the time talks resume in September, US farmers will be harvesting yet another crop of soybeans but for whom?

Not that that easy to win trade war is the only problem US farmers are facing this year.

Farmers struggle to find hay for animals as wet spring creates shortage

July 30, 2019 / 3:00 AM
EVANSVILLE, Ind., July 30 (UPI) -- Historically heavy rains across the Midwest this year have hindered hay production, leading to a troublesome shortage in many farming communities.

Hay stocks across the Midwest this spring were down 24 percent from last year, said Lance Zimmerman, a research and data manager at Cattle Fax, which monitors and informs the cattle industry. And last year's stocks were below the norm, he said.

"It does put producers, especially dairy producers, in a tough spot," Zimmerman said. "They are the ones in most need of hay. Typically, beef cattle are put out to pasture this time of year. But dairy cows need to be fed."

As stocks dwindle, the price for hay is shooting up. The average price for alfalfa hay topped $200 per ton in July, the highest in five years, according to the U.S. Department of Agriculture.

Livestock producers, dairy farmers and horse farms are having searching wide geographical areas to find available hay.

"I normally sell to horse farms," said Karl Gearhart, the owner of Gearhart Farms, which grows and sells hay in central Ohio. "In the last four months, I've sold more to dairies and beef cattle than I have in the last 17 years I've been in business."

Like other hay producers, Gearhart's supplies are running low, he said. Heavy rains this spring prevented many farmers from planting hay fields, and those that were planted either didn't grow well, or were too wet to harvest.

"We've just had too much rain," Gearhart said. "Alfalfa doesn't like the wet."

This is the second consecutive year that hay production has been down in Ohio, Gearhart said. And because this year's slump is so widespread across the Midwestern region, it is becoming increasingly difficult to find hay even from out of state.

If the slump continues, Gearhart worries farmers in his area won't be able to go on. Two nearby dairy farms closed this spring, he said. (Dairy farms have been closing at record rates over the last year, after four years of depressed milk prices resulted in most dairy farms losing money for the last four years.)
More

“When you put tariffs on goods that people in the United States consume every day, it's a consumption tax. So all the tariffs did is they made products that Americans were going to buy more expensive. And in fact we got the final trade data numbers ... And lo and behold [in 2018], we hit an all-time record-high trade deficit globally, and with China."

Gary Cohn.  President Trump's former director of the National Economic Council.

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, Europe again. With a clean no-deal Brexit 91 days away and a Trump tariff war to come on German Cars and French wine, is a recession in store for Europe’s Christmas 2019?

"We can also do stupid."

Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. European Commission President. Scotch connoisseur.

Euro zone growth halves, inflation slows in spur for ECB

Jan Strupczewski, Philip Blenkinsop  July 31, 2019 / 10:12 AM
BRUSSELS (Reuters) - Euro zone economic growth halved in the second quarter and inflation slowed sharply in July, reinforcing market expectations that the European Central Bank will further ease monetary policy in September.

The European Union’s statistics office said on Wednesday that gross domestic product in the 19 countries sharing the euro grew 0.2% quarter-on-quarter in the April-June period, down from 0.4% in the previous three months and returning to the anaemic rates seen in the third and fourth quarters of last year. 

Inflation, which the ECB wants to keep below, but close to, 2%, also slowed to 1.1% year-on-year in July from 1.3% in June - the lowest reading in 17 months. (For a graph see: tmsnrt.rs/2OxUaZa)

“We expect the ECB to respond to this broad-based economic weakness – which we think is likely to continue – with a round of extra policy easing, including restarting QE and cutting rates,” said Daniele Antonucci, economist at Morgan Stanley.

Core inflation, which strips out volatile unprocessed food and energy and which the ECB scrutinizes in policy decisions, also fell to 1.1% in July from 1.3% in June.

The even more narrow measure excluding also alcohol and tobacco prices that many market economists look at was down to 0.9% from 1.1%, strengthening the case for a package of ECB measures to support the economy and faster inflation.

“The ECB more or less announced what it will do - cutting rates, probably restarting QE and putting in place the tiering system for the banks,” said Peter Vanden Houte, chief economist at ING.

“The big question is if all of this will have much of an impact on both inflation and growth as we are starting to get to the limits. Now it’s up to governments with more pro-active fiscal policy to step in as the ECB cannot do it alone.”
More
https://uk.reuters.com/article/us-eurozone-economy/euro-zone-growth-halves-inflation-slows-in-spur-for-ecb-idUKKCN1UQ10K

German Unemployment Rises as Manufacturing Slump Starts to Bite

By Kristie Pladson
July 31, 2019, 8:55 AM GMT+1
German unemployment rose and demand for new workers dwindled, a sign that weakening economic momentum is starting to affect the labor market.

The number of people out of work increased by 1,000 to 2.283 million in July, marking the third month that joblessness in Europe’s largest economy hasn’t declined. The unemployment rate remained at 5%, close to a record low.

The figures suggest gathering storm clouds for the German economy, which has been relying on lively household spending to prop up growth. Manufacturing is mired in a deep slump exacerbated by international trade disputes and weakening global demand.

German companies are planning fewer new hires, and manufacturers are set to eliminate more jobs than they create. Business expectations fell to their lowest level since 2009 in July, and the Bundesbank says the economy likely shrank in the second quarter.

European Central Bank officials will be keeping a close eye on Germany over the coming weeks as they consider deploying fresh monetary stimulus. Further cuts to already negative interest rates and asset purchases are among the options to boost a lackluster euro-zone economy.

German supplier Eisenmann files for insolvency

July 30, 2019 10:14 AM
FRANKFURT -- German partsmaker Eisenmann, which supplied Tesla in 2015 with a new paint shop at its plant in Freemont, California, filed for insolvency late on Monday. It is the latest sign of the growing economic problems crushing profits in the auto sector.

Eisenmann, which has 3,000 employees and generated annual revenues of 723 million euros ($806 million) in 2017, filed for insolvency at the Stuttgart District Court.

The company, which is based in Boeblingern, Germany, said it was now looking for a strategic partner for its paint and assembly unit, as well as its application technology business. Potential buyers have already expressed interest, Eisenmann said.

The insolvency comes as bigger auto suppliers and automakers including Mercedes-Benz parent Daimler and technology and tire specialist Continental have issued profit warnings, triggered by a worse-than-expected downturn in demand for global vehicle production.

Robert Bosch revised its forecast for global automotive production last week. The world's largest auto parts supplier now expects a 5 percent decline in vehicle output this year, bigger than an earlier estimate of a 3 percent decline.
More

“When it becomes serious, you have to lie.”

Jean-Claude Juncker. Failed former Luxembourg P.M., serial liar, president of the European Commission. Scotch connoisseur.


Technology Update.
With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards?

Improving efficiency, brightness of perovskite LEDs

Date: July 30, 2019

Source: American Institute of Physics

Summary: Advances in organic phosphorescent materials are opening new opportunities for organic light-emitting diodes for combined electronics and light applications, including solar cells, photodiodes, optical fibers and lasers. While low-dimensional luminescent materials, like the calcium titanium oxide mineral perovskite, have promising optical properties, their performance remains insufficient compared to conventional organic LEDs. A recent study explores a new approach using an exciton confinement effect to optimize highly efficient perovskite LEDs. 

Advances in organic phosphorescent materials are opening new opportunities for organic light-emitting diodes for combined electronics and light applications, including solar cells, photodiodes, optical fibers and lasers.

While low-dimensional luminescent materials, like the calcium titanium oxide mineral perovskite, have promising optical properties, their performance remains insufficient compared to conventional organic LEDs. A recent study, published in this week's Applied Physics Reviews, from AIP Publishing, explores a new approach using an exciton confinement effect to optimize highly efficient perovskite LEDs.

To achieve an efficient electroluminescent device, it must have a high photoluminescence quantum yield emission layer, efficient electron hole injection and transport layers, and high light out-coupling efficiency. With each new advance in emission layer material, new functional materials are required to realize a more efficient LED. To accomplish this goal, the authors of the study explored the performance of an amorphous zinc-silica-oxide system layered with perovskite crystals to improve the diode performance.

"We think that many people [are] too focused on an emission layer," said Hideo Hosono, corresponding author on the study. "For a device, all layers are equally important since each layer has a different [but] crucial role."

The amorphous zinc silicon oxide has a shallow tunable electron affinity, capable of confining excitons, but also high electron mobility to transport electrons. By layering the perovskite crystal and the amorphous zinc silicon oxide, the team developed a way to confine excitons and inject the electrons into the 3D perovskite layers efficiently. The energy-level alignment between the layers proved an ideal material for this purpose.
More


Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. European Commission President. Scotch connoisseur.

The monthly Coppock Indicators finished July

DJIA: 26,864 +53 Up. NASDAQ: 8,175 +65 Down. SP500: 2,980 +53 Up.  

The S&P and Dow remain up, but in very unconvincing fashion. The NASDAQ remains down.  Like the Fed, I would await a better data driven signal from the indexes

No comments:

Post a Comment